The future of job creation? Be a good place to start up

24 Apr 2017

Inside the door at the Rockstart accelerator in Amsterdam. Image: John Kennedy

Cities, towns and regions need to put a stamp on their start-up identity if they want to attract the next wave of founders and multinationals, writes John Kennedy.

The sun shone brightly on the courtyard that formed the entrance to Limerick man Paul O’Connell’s ambitious start-up event in Amsterdam last week: Uprise 5.

The event, held in a former factory-turned-nightclub in an industrial park in the city’s docklands area, captured the essence of Amsterdam cool as tech founders, coders and creative types milled around in excited conversation, capturing the late spring rays while, inside, DJs pumped out beats that were muffled just enough not to interrupt the chatter.

‘You want this movement to last for decades, not months’

It was a relaxed scene. Inside, as various conferences took place on everything from fintech to the future of media, around 120 start-up companies were on show. The whole thing had a chilled vibe that belies the flurried start-up activity occurring across Europe.

And that, to me, summed up the start-up scene in the Netherlands. It is a bit like a swan: calm on the surface, but paddling furiously underneath; similar to the droves of cyclists that traverse the city – stately, elegant and upright. The earnest and good-humoured bonhomie is balanced with a rhythmic work ethic and a healthy local capital scene. That’s Amsterdam.

Every city is different

The future of work? Be a good place to start

Uprise 5 in Amsterdam last week. Image: John Kennedy

The next day, while taking in the Rockstart accelerator in the city, community growth manager Andrii Degeler summed it up: “It’s a tight community, and access to capital is not a problem in Amsterdam.”

Each city has its own imitable start-up culture and challenges, for different reasons.

Before I get accused of drinking the Kool-Aid, start-ups are hard work. The majority fail, but the successful ones are fundamentally a product of their respective environments.

San Francisco is bolstered by heady amounts of capital, a relentless optimism and the safety blanket of knowing that if your start-up fails, you can always go and work at Google, Facebook or another start-up. Dublin isn’t too far behind in this respect, except for less abundant sources of capital.

London start-ups, for example, have a swagger and confidence that is justified by a buoyant scene. And, of course, UK start-ups have the benefit of progressive tax polices such as the EIS (Enterprise Investment Scheme) that make their Irish counterparts – SEIS and capital gains tax – seem like the tawdry, complicated shambles that they really are.

In Dublin, the pioneering work completed by former start-up commissioner Niamh Bushnell in carving the city’s identity, community and culture is being continued by the Digital Hub and DCU Ryan Academy. It will be interesting to see what Bushnell does with her TechIreland project, enabling the nationwide start-up community to coalesce and share intelligence. I think, and suspect, that the end result could be crucial in establishing a start-up identity that is uniquely Irish.

Cork, which did not have the benefit of Silicon Docks, carved its technology identity regardless, driven not only by the presence of tech giants such as Apple in the city, but also the entrepreneurial exploits of founders such as Pat Phelan, and Teamworks’ Peter Coppinger and Daniel Mackey.

In spite of vital supports, it was the Cork people, their effusive networking abilities and enormous drive that created an enviable stamp of identity on the city.

And now, it will be interesting to see how the new incubation spaces at Teamwork, as well as DC Cahalane’s new Republic of Work co-working space, will help foster collaboration and community in the region.

Sligo’s new Building Block aims to generate 200 start-up jobs

The Building Block in Sligo. Image: Jordan Cummins Photography

The north-west lit up on social media last week when we wrote about the new Building Block facility that opened in the centre of Sligo town, which will host not only start-up ventures, but also scale-up SMEs, multinationals and overseas companies stepping gingerly into Ireland for the first time. The project has the potential to generate 200 new jobs.

Galway, driven by the closure of Digital in the 1990s, is a celebrated haven for life sciences and medtech start-ups as founders who grew up as executives at Digital (then Compaq and now HP) put their experience to work. The region now boasts a concentration of life sciences companies second only to the US.

As I said, environment has a lot to do with it.

All businesses are a product of their local environment

As I spoke with a slightly jaded Paul O’Connell the day after his Uprise festival, he suggested that even the term ‘start-up’ is becoming slightly redundant, if not passé.

The reality is that all businesses of all kinds have to ‘start’. We are in danger of labelling any entrepreneur that starts a business as a start-up. Would you call a new shop, pub, restaurant, hairdresser or garage a start-up? And what kind of business could start today without looking through a digital lens such as employing social media, apps or APIs to get stuff done?

On the one hand, the term ‘start-up’ is glamorous, and there’s nothing wrong with encouraging people to be entrepreneurs. But the idea is half-cocked if the environment isn’t there to support them.

Technology and life sciences start-ups are hard for a reason. They are building something new, breaking new ground and pioneering the future. Overheads are different, staff are more expensive and they are competing with multinationals for programmers and engineers. R&D is a factor, securing patents is a factor, and time to market and build that minimal viable product is a factor. Wooing investors is tough and there is often a short window of opportunity.

The reality is that only a small number of start-ups in technology really succeed. There are many different business types that risk being undermined if we ghettoise the terms ‘start-up’ or ‘entrepreneur’ as meaning one and the same.

In Ireland, traditionally, we had a loose, almost suspicious, opinion of entrepreneurs, which I perceive to be reflected in the shambolic tax policy that undermines rather than supports start-up efforts.

Each city or region that is home to emerging start-ups or a nascent entrepreneurial business culture will put an indelible stamp of identity on what emerges. Start-ups are a product of their environment, and a serious amount of thought needs to go into why it is important to have a supportive community.

Currently, Enterprise Ireland is creating regional funds for the deployment of investment to various corners of the country. We recently reported how TSSG chairman and FeedHenry co-founder, Barry Downes, is to lead a new €20m venture capital fund called Suir Valley Ventures to focus on IoT, fintech and augmented reality.

The new reality is that a thriving start-up ecosystem will be critical to efforts by agencies such as IDA Ireland in attracting future multinationals to locate in cities, towns and regions across Ireland.

IDA’s policy of luring in multinationals while they are still quintessentially start-ups is a long-running strategy that works; Apple was only four years old when it arrived in Cork in 1980, Facebook was also four when it came to Dublin in 2008, Google was five in 2003 and Twitter was four years old when it arrived in 2011.

The reason that future companies and employers will locate in Ireland will be for talent and acqui-hire purposes.

They will locate where they can find people. They will locate where they can buy these people’s companies and intellectual property in the latest phase in the war for talent. Those companies could become the big employers.

Facebook-owned Oculus acquired Cork tech firm InfiniLED last year. Around the same time, IT security giant Sophos acquired David Coallier’s Cork-based company Barricade for an undisclosed sum.

Study these acquisitions carefully, because they will be part of the template for how multinationals will arrive in cities, towns and regions long into the future.

If you want to capture the next phase of multinational investment, you need to have the right start-up environment with unique characteristics and culture, as well as companies that are products of the right environment.

New ways of thinking

Fresh ideas around funding start-ups need to be considered, along with the new regional investment funds.

One example that comes to mind could be the creation of a new class of Competitive Start Fund, one that doubles the current €50,000 allowance to €100,000. It would ensure that promising tech or life sciences start-ups can survive the Valley of Death, which four out of five companies fail to cross and end up in the foothills of failure because of a paucity of local seed and follow-on capital.

If we want to bring in future job creation projects, it is going to be incumbent on having a vibrant local start-up scene that has its own identity and creates that magnet.

You need break-out success stories that stand on their own feet to put these places on the map.

On my way back from Amsterdam, I spoke with Bank of Ireland’s entrepreneur in residence, Gene Murphy, who believes that the local environment needs to embrace start-up thinking and methodologies if the current wave of entrepreneurship is going to take root and drive jobs in the future.

“For all the time I have spent around start-ups, I am convinced it’s not a thing you can put your finger on – it is more of a mentality. It is very important that the local environment is part of it; banks, local businesses, schools and community. If you can tap that flow of entrepreneurialism through local businesses, corporates, up-and-coming spin-outs in local firms, spin-ins and more, you can create that environment and mentality.

“When you think of Irish culture, we are great storytellers, and that is part of our identity and it stands to us overseas.

“Every ecosystem has its own challenges and it will be interesting to see if entrepreneurship becomes the norm and sticks.

“You want this movement to last for decades, not months.”

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John Kennedy is a journalist who served as editor of Silicon Republic for 17 years